The World Bank's assistance to the power sector focuses on supporting reforms at the state level. Orissa was the first state to launch a major overhaul of its power sector. To support the state's program, the Bank provided a $350 million loan in 1996. A new lending instrument, the Adaptable Program Loan (APL), has since been developed and is the cornerstone of the Bank's current approach to supporting India's state power reforms.

The APL involves a series of loans through which the Bank provides phased and sustained support for a borrower's long-term reform program. With the APL, the Bank enters a long-term partnership with the state, indicating the Bank's commitment to provide financial assistance to support far-reaching power sector reforms over an extended period of time. An initial small loan is extended to launch the reform process, thereby helping the state take the first steps in the reform agenda, implement critically needed investments, strengthen political ownership, and most importantly, build wider public support for the program. Subsequently, a series of larger loans are extended, the exact amount and timing decided between the Bank and the state based on agreed milestones achieved in implementing the reform and investment program, and on new investment requirements.

Haryana was the first state to benefit from the new approach. In January 1998, the Bank approved a US$60 million APL to support the first phase of the Haryana's ongoing program to restructure its ailing power sector. The loan is the first of a series of APLs totaling US$600 million that the Bank plans to provide over the next eight to ten years to support the program.

The approval of a US$210 million APL for Andhra Pradesh followed in February 1999, the first in a series of APLs totaling up to US$1 billion that the Bank plans to provide over the next eight years. The World Bank is supporting Uttar Pradesh through a US$150 million loan approved in April 2000. These loans will help to transform the state's power sector from being a major drain on the state's budget into a source of revenue for priority sectors.

Rajasthan is receiving similar assistance under the Rajasthan Power Restructuring Project, and it is expected that other states will be inspired to undertake meaningful power sector reforms.

The Bank has been closely involved in POWERGRID's development from the beginning of its operations, funding its power systems coordination and control facilities; transmission lines and substations; and various institutional development activities. POWERGRID's establishment process involved the transfers of the transmission components of several earlier Bank loans and IDA credits.

Supporting Energy Development

Coal is India's least-cost source of primary energy and currently meets two-thirds of the country's energy needs. The Bank is helping Coal India, Ltd., the leading coal producer, to carry out high-priority environmental and social mitigation programs and strengthen its capacity to deal more effectively with environmental, resettlement, and rehabilitation issues through a Coal Sector Environmental and Social Mitigation Project. The Bank-financed Coal Sector Rehabilitation Project is financing a time-slice of Coal India's investments in 24 mines to improve the efficiency of mining operations and thereby assisting Coal India to meet the additional demand for coal. This project supports the liberalization of the coal sector and the development of a new regulatory regime. To complement the Bank's ongoing support for coal sector reforms, the Bank's private sector arm, the International Finance Corporation, has invested in one of the first private coal mines in India.

Together with the Global Environment Facility, the Bank is supporting renewable energy using solar photovoltaics, mini-hydropower, and windpower through an ongoing Renewable Resources Project.

A follow-up renewable energy project has been processed. A major hydropower project is being implemented with Bank support in Himachal Pradesh.

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